LTSPC Qualifying Loans
Farmer Mac’s charter authorizes a maximum loan size of $9.8 million (adjusted annually for inflation) for a Farmer Mac I eligible loan secured by more than 1,000 acres. For loans secured by 1,000 acres or fewer, Farmer Mac sets the maximum loan size to be $22.5 million allowing the program to work for small, highly-valued acreages. Farmer Mac maximum loans amounts are listed below:
- $9.8 million – if secured by more than 1,000 acres
- $22.5 million – if secured by 1,000 acres or fewer
- $22.5 million – maximum total exposure to any one borrower or related borrower
Loans falling within the volume requirements are then analyzed for eligibility by Farmer Mac using one of two methods:
- If the LTSPC participant uses a 14-tier methodology under the Uniform Classification System (UCS), loan eligibility is determined by the classification level after Farmer Mac has tested the lender’s risk classification methodology. Borrowers with loans classified as risk grade 7 or better are eligible for inclusion in the LTSPC pool; loans classified as risk grade 8 or 9 may be eligible but are subject to review by Farmer Mac(subject to the criteria listed in the following paragraph) before being added.
- In lieu of the UCS approach, loan eligibility is determined based on an analysis of the level of seasoning of the loan and the borrower’s performance. Only loans with remaining terms greater than one year will be considered. Loans made as amortizing loans must have amortized per their schedule. Revolving facility loans may qualify, depending on the lender’s administrative procedures for loans of this type.
Loans originated less than five years prior to placement in the LTSPC pool fall under the umbrella of “new and existing” and at the time of origination must have met the Farmer Mac underwriting standards such that the loan is qualified.
Loans on the books for at least five years and where the current LTV is < 60% may be treated as seasoned loans if they demonstrate timely payments in each of the three years prior to inclusion of the loan in the LTSPC pool and no restructuring has taken place on the loan. Seasoned loans may include loans with maturities of less than five years if the loan represents one that has been renewed sufficient times to meet the five-year requirement.
Participations (partial interests in loans) for which the requesting entity is the lead lender may be placed in a LTSPC pool as long as each participation meets all Farmer Mac qualification requirements and the unpaid principal balance on the gross loan falls within the maximum loan sizes listed above.
Farmer Mac completes its due diligence work prior to the LTSPC going into effect. Due diligence involves not only a review of data but also of loan file documents. Farmer Mac will conduct reviews remotely by reviewing scanned/emailed files.
